Buy and Build — a New Playbook for AI Entrepreneurs
LLMs unlock an opportunity to reimagine labor-intensive service businesses. Operators who take an AI-forward, “buy and build” approach to transforming legacy industries have a head start.
We believe LLMs have the power to transform slow-growth, low-margin service businesses into fast-growing, high-margin machines.
Rote, clerical work that defines industries like tax prep, corporate bookkeeping, title insurance, and healthcare billing is exactly where AI shines. And because compute is cheaper than wages, AI-powered service businesses will realize transformative efficiency gains.
The real challenge is distribution.
Today’s company-building playbook won’t work. Service businesses are notoriously fickle technology laggards who are ruthlessly protective of customer relationships.
Selling human-replacing technology to incumbents is either too awkward or too disruptive. Competing against incumbents as a fledgling AI company with an untrained model is a losing proposition.
To build a fast-growth, high-margin, AI-enabled service business, you need data, credibility, and capital. We believe the most expedient path to achieving this is to “buy and build.”
Instead of competing against or selling to, step zero is to purchase an incumbent. This gives you data, credibility, and sticky customer relationships on Day 1. Spend the first six months developing an AI-alternative to the company’s services then slowly transition workflows to prove out efficiency gains. Because you own the business, you can expedite operational changes in a way no vendor ever could.
Once you’re confident in your model, scale it up through M&A, direct selling, or licensing your tech to incumbents — or all three! The point is you’ve overcome the cold start and now have options.
Importantly, the service businesses worth acquiring are already profitable. Often run by retirement-ready boomers, these are stable companies with predictable cash flows seeking modest EBITDA multiples. Founders who creatively use debt, equity, and seller financing can fund a handful of deals with the proceeds from a typical Seed round.
This gross oversimplification hides the intense deal-making, change management, and sea of technology decisions that confront founders pursuing this path. But those who succeed will find themselves on a rocketship.
We’ve already backed founders pursuing this strategy and we’re eager to support others. If you’ve identified an industry ripe for this disruption and are excited by this new “buy and build” playbook, we’d love to talk to you.
Coauthored by Brian Murray and Andrew Ziperski.
